Darl McBride's Harvard Appearance - Transcript

By Pamela Jones
Groklaw

February 15 2004

Of course, this isn't an official Harvard transcript, although I did request and receive permission to do it. Harvard placed no restrictions on taping the public event.

Although we strive for accuracy, any errors/inaccuracies are the fault of Groklaw and not the Harvard Journal of Law & Technology, who invited McBride to speak, or the fault of SCO, or any other person or organization. If accuracy is vital, do check with the Harvard video. If you wish to hear the talk to verify it, or to see the slides here [ http://jolt.law.harvard.edu./p.cgi/speakers.html ] is the Harvard video [scroll down]. Note that Harvard has also made it available in Speex [ http://www.speex.org/ ] format.

Transcribers for Groklaw on this project were Creysoft, Scriptwriter, fjaffe, Kelledin, RSC, PM, be2weenthelines, coffee17, jbeadle, Gregory, and coordinator LHJ.

We left off last names of audience members. In most cases, we couldn't make out the names, and even when we could guess, we had no idea of spelling or if the parties would wish their names used. If, however, you were the one asking a question, and you'd like to provide your name, we'd be happy to insert it.

Note that while they announced that Chris Stone of Novell would be the next speaker, Eben Moglen will be the speaker on February 23.

***************************************************

Mike Zarren: So welcome everyone. I'm Mike Zarren, the Editor-in-Chief of the Harvard Journal of Law and Technology. Thanks for coming, all of you who are both from Harvard and not from Harvard.

Just a couple announcements. We started this speaker series quite some time ago with the intent to educate people here most specifically on all sorts of emerging issues in the fields of the intersection between law and technology, mostly because a lot of the people who go to school here and people who are interested in what goes on here are people who actually have to deal with all the issues at stake in cases like this one. So, since then, you know, we've started to webcast these events and they've always been open to the public, and I think maybe the webcasting in some way has not necessarily always been the best thing for us, if only because then people who are watching who aren't here and who aren't affiliated with the school don't necessarily realize, you know, the people we invite to speak are just people who we're interested in hearing from, not that we're endorsing them or not endorsing them or whatever. So, I don't know what we'll do with the webcasting in the future, but in any case I do want to announce we're going to have another speaker in a few weeks. Chris Stone, the vice chairman of Novell will be here speaking on these same issues. So for people who are perhaps concerned about editorial issues and the like, not to worry.

Second of all, I just want to say a very brief thing about our journal. Our latest issue should have been out today. We don't have it yet, but the articles are all available online. Some interesting articles about a tax on devices used to fileshare, and then free filesharing, another interesting article on antitrust and the FCC, selling a service by email, nanotechnology, other articles like that. So you should check out our website at jolt.law.harvard.edu if you're interested in any of those things. With that I'd like to turn it over to John Palfrey, the executive director of the Berkman Center for Internet and Society, whom we've invited here tonight to introduce our speaker. So, John.

John Palfrey: Mike, thank you so much. So, I suspect, judging from the phone calls and emails that many of us have gotten today about this event, that it may be nearly as controversial as last night's Super Bowl half-time show. Hoping that it will perhaps be just as revealing in a way as well.

It is my great pleasure to be here tonight. Mr. Darl McBride joins us, president and CEO -- I think as everybody here knows -- thank you very much -- of the SCO Group. He comes with a number of colleagues as well. He is no stranger to big business and no stranger to the technology world. He is actually quite a learned man on things like the GPL, as we are going to hear shortly. I noticed in his slides he has references to former professor Mr. Justice Breyer, so I look forward to seeing how he incorporates the Harvard Law School into his remarks as well.

A couple of other quick notes. Just by way of tone and format here tonight. There have been a number of conversations about this event and the format. I want to credit Mike and JOLT and others for bringing this event here tonight, and credit them also for what they're going to do shortly with counterpoint. I suppose it comes as no surprise to anybody in this room that there is a lawsuit at stake here, a lawsuit with some very, very big stakes. And I want also just to state really quickly that it strikes me that this is a very important thing to have happen here tonight, and with this crowd.

I think that there are two important things that those of us who spend our time in the Academy do. One is to frame the hard questions -- framing hard questions for ourselves and for the society around us. This is an issue -- this open source/free/libre software issue versus, or in addition to, other forms of software production -- is a critically important topic and one where there are lots of different viewpoints, and I think it's wonderful that we're framing up the many hard problems that this has. And secondly, is to seek the truth. I think that we will have a very interesting presentation shortly. I would urge in the question and answer session that follows, for all of us to treat with respect this -- excuse me ... to treat with respect this microphone -- but treat with respect this forum and this space, and there are a lot of brilliant minds I see in this room, not just from Harvard Law School and 02138 but some friends from 02139 as well, and so welcome. So I mean this as a two-part introduction, one of Mr. McBride, a distinguished businessman, and second, of this community, broadly writ, and I urge us all to keep our minds open. With that, Mr. McBride.

[5:00]

Darl McBride: Thanks, John. And better put this on. Here we go. Is that on? OK.

John and Mike, I appreciate the invitation to come back and join you as well as everyone who has joined us today. It's tough to compete with nudity, and I didn't bring any here today, and you don't want me. So I bring that up as a little bit of an interesting point. There was an article written about this issue you are about ready to hear about today, around SCO's intellectual property fight with the Linux community and, by extension, with IBM. Or maybe it's the other way around. It was written in Forbes magazine earlier this summer, and it was posted out on Forbes.com. And the story was the most hit story in the history of Forbes.com except for one. And that story was called "The Ten Best Nude Beaches in America". So, once again, it's tough to compete with that.

But, I do look forward to meeting you here today. I would say I am very excited. I showed up at a time where we had a bunch of meetings tomorrow in Copley Square right around twelve o'clock.. We scheduled this two weeks ago. And, if anybody knows what's going on in Copley Square tomorrow. . . Anybody watch the game last night? Anybody Patriots fans here? Yeah. That was a great game, wasn't it?

Boston man back there. Is that a Red Sox hat?

Audience Member: Yes, it is.

McBride: OK. I went into the game as not a Patriots fan and exited the game as a Patriots fan. That was just an outstanding game. Kudos to your team, that was a great game. We have a little bit of a Super Bowl ourselves going on here in the computer world right now. And it's ... I would argue it's around defining the future of how digital rights are going to play out in the software world.

The players on the field here are the SCO Group, which after a series of acquisitions over a number of years owns this thing called the Unix operating system. So we're the owners of this source code and copyrights around Unix.

And, the other player on the field is International Business Machines, who is also stepping up as a leader for basically the Linux environment. If you read USA Today you would see -- as you saw in the game last night -- you've seen ... a lot of people around the world have been seeing IBM running a lot of ads around Linux. If you open USA Today, the second page, you will see IBM integrally tied to this thing called Linux.

How many of you in here have even heard of this thing called Linux before? Raise your hands. Virtually everybody. OK. So, I appreciate the fact that we are coming into a well-educated audience on this issue. So those are the players on the field. What's at issue here if SCO wins vs IBM wins? I think that it's going to reshape the future of software one way or another. That's my view on it.

So with that said, why don't we just dive in here? This is a few stats on our company, what we're about. As you put the two combatants on the field, clearly you see this is a David-Goliath type of thing when you see our revenue versus IBM's. We measured out in market capitalization one time, if the size of us is measured against IBM in market cap, IBM would be the 10,000 pound man, if we were 200 pounds. So clearly, obviously, they are much more powerful and much bigger than us.

The topics that I would like to go through for discussion this evening are as follows:

The importance of intellectual property, go through a little bit there.

I want to talk about SCO's ownership position around this thing called Unix -- it looks like we have a few people here that are pretty clearly expert in that -- and give you my view on that.

We want to talk about what we're doing to defend our intellectual property rights.

And then with some of the things going on as we speak.

You know, the side show in the Super Bowl yesterday was the half-time show. The side show in the IBM-SCO battle are things that have happened in the last week with the MyDoom virus. The largest virus, supposedly, in the history of the computing industry, launched the largest attack, DoS attack, on a company website, which was our website, yesterday. So, that's a little bit of the side show going on. But it is going to have an impact, I think, in terms of how things are playing out in this digital age.

Finally, what does the future hold? So starting off -- let me back up just a minute. I -- as a precursor to this -- sat in a room a little larger than this about a year ago out on a campus at Brigham Young University, and the CEO of a leading open source company came out there and spoke. And I was kind of interested to go and hear what he was talking about. So this was a competitor of ours, and I was actually kind of interested in going and breaking bread with him and talking about how can we move the ball down the field together? How can we work together? As I went to hear his speech, I was sitting up there amidst a bunch of students. I didn't look like a student, which I wasn't, therefore it made sense I didn't look like one. But as he spoke, there were a couple of things that were striking to me. The first thing that was striking is he got up and started talking about how the copyright system in America was outdated, that the copyright laws had been on the books for hundreds of years, and they were totally out of sync with what was going on in the digital age, and he was calling on students to write your Congressperson, lobby Congress to, sort of, overturn the current copyright laws. We need to get these copyright laws out. This DMCA, Digital Millennium Copyright Act -- you're all familiar with that, I'm sure -- is a disaster, we've gotta get it out. And it was interesting for me as a CEO of a company who has very important copyrights to hear. The attack was not on us directly. It was, We've gotta get rid of copyrights, because that plays into what we want to do with our open source system. So that was interesting to me. Second thing that was interesting was he said, one of the questions along the way was, Who do you compete with? What are you selling in the marketplace?

[11:30]

So he's selling this thing called Linux. He said, Well, what we do is we have this operating system, and it's Free. OK? And we go into corporate environments, and we go out, and we're basically ... essentially what he said is we're trying to displace a company called SCO and Sun. And I was like, "SCO!? That's me!" You know? So I took that real personally. And we didn't break any bread that day.

And about a month or two after that, after some things happened between us and IBM, we launched into what became a $3 billion lawsuit with the SCO group against IBM, filed on March 7th .. March 6th of last year. So one of the questions that I want to have all of you take a hard look at as we go through - I'm going to speak for, I don't know, 30 minutes, 40 minutes or so, and then we'll go to Q&A. I'd like you to take a hard look at this question of the importance of copyrights. This Dilbert cartoon just came out here last week, and it was interesting to me.

"I created software that makes all copyrighted work on the net available for free."

"Well, gee, wouldn't that destroy all forms of creativity and plunge us into a depression?"

"Yeah, but it was very neat."

I think some of the elements that we're dealing with here are along those lines. So, I'd like to start off by talking about this whole issue around intellectual property. And what's going on there.

[13:00]

If you look at some of the statistics, what you see is that copyrighted works are a big driver for the industry. Look at the GDP numbers there. You know, a half trillion dollars. You know, significant workers involved with that, and export and sales of those products are also significant. Another interesting statistic here to look at is how the intellectual assets are gaining in momentum. If you look over the last 20 years or so, what you see here [points to slide] is the percent of corporate assets in the US that were physical are shrinking. What's not stated here is the soft assets, the intellectual property assets, inversely, are gaining ground. So, as we've all heard for a long time now, you know, intellectual property is becoming a significant part of our society. And this is just a chart that supports that notion. If you go to this whole issue around the protection of intellectual property, and we're going to talk here in a moment about a case, Eldred v. Ashcroft. How many of you are familiar with that?

OK. Obviously, it was a big deal here in the last year. But the setup for that case is this Constitutional power that's granted to Congress. "They shall have the power to promote the progress of science and useful arts by securing for limited times for authors and inventors, the exclusive right to their respective writings and discoveries." This progress of science, "for promoting the progress of science" really becomes the key turning point in Eldred v. Ashcroft. But, you know, some of the underlying points to this, you know, it really justifies the initial investment in intellectual property, based on a return of future investment. You know, the ability to license your work and see that as an investment. It ensures value not only for you, but also the customers that you may be licensing that to.

[15:00]

So, as we get into this, then, one of the things that we see in this digital age that we live in, that is, just over the last five years I would say, really accelerating, is the question of how you deal with digital works that are easily available. OK?

If you look across these various industries up here, what you see is there are a lot of industries struggling with the notion of how you deal with free, downloaded copyrighted works over the internet. So let's start with Napster. So five years ago, anybody download over Napster? I'm not with the RIAA -- feel free to raise your hand. We won't put the camera on you. OK. So five years ago, how many people around the world were doing Napster downloads for free? Anybody remember the numbers? What's that? I thought I heard something over here. I heard numbers as high as 40 million people were doing downloading of Napster songs. And it was very exciting, you know. Loading up. It's like going into a CD store, getting CDs, putting them in your pocket, walking out the front door, and it's great. Obviously, nobody's doing that now because, you know, it's been deemed, seemed to be not a good thing to do. So now you have, what have you got out there now? You've got iTunes, you got Napster for pay, so you have all these music sites that are now out there not for free.

You have the video industry that's out there. We sat through a presentation that one of the leaders out of Hollywood talked about: We can not compete with a free model. OK. These films were out there, they were being pirated, bootlegged, and spread around the world for basically viewing before they even showed up in the theaters.

The...[lights go down and up][laughs] As long as you're not sending any messages, I just want to make sure there's no coordination there.

You know there are a number of industries here that are struggling with this. You know, the drug industry has these patents, and they protect them, and they have a certain life, they expire, and then they go to something else. There's this underlying question as to how big of a role are these free models going to work in protectable industries?

So in the case of Eldred v. Ashcroft, Congress -- basically their view on that -- Congress came in with a number of prominent artists. They expressed their belief about the copyright system, how important it was for them to get fair compensation and so the comment that came out of that, we would not take Congress to task for creating this evidence, which as Justice Breyer acknowledges, reflects general propositions about the value incentives that are undeniably true. So the basic concept that comes out of this is, fair compensation with an incentive to create your works.

Now let's move on. What are some other things that happened in that case? You have Justice Stevens' characterization that the reward to the author of a copyrighted work is really a secondary notion. The primary driver, he argued, was really around the progress of science, and that's what should be driving and dictating how these copyright laws come down.

Now, significantly, he was in the minority on this case, and so as they came back in and explained on the majority opinion, the economic philosophy behind the copyright clause is the conviction that the encouragement of individual effort by personal gain is the best way to advance the public welfare, through the talents of authors and inventors. So I think one of the things you are going to see here, and maybe many of you or some of you in this room are going to help to shape this argument as you graduate and go on from here, is this question of which side of this is going to win? Now clearly, from where we stand now, Eldred v. Ashcroft, seven Supreme Court justices have already ruled heavily in favor of the notion that copyrighted works are extendable, they're protectable, and this notion of progressing science will happen best through leaning to the side, and to the favor, of individual artists. OK.

The minority opinion, and the people who argued that, I understand there are some folks here at your university, as well as obviously Larry Lessig, Eben Moglen, there a lot of folks that are on the other side that say No, the progress of science is going to be the key determiner of how this whole thing plays out. So that battle is still going on, even though there's been a Supreme Court decision ruled there.

[20:00]

So, intro part here then is basically a few slides establishing the basis for how important this intellectual property is and that there are some big arguments that are still on the table. [new slide]

I'd like to shift gears for a moment now and talk about my company, and why we are so involved, embroiled, in this big argument that's going on inside the computer landscape. So -- history of Unix, this thing was started -- so, if you think about computer operating systems, there are two major types around the world. You have Windows, Bill Gates, gazillions of dollars, they got all -- that whole thing, OK, that's desktop-centric and then works back towards the back-end server.

Unix is the other big type of operating system, and Unix is not so much geared towards the desktop or a consumer environment. It's really geared to run businesses. So when you look behind businesses, and you look at the servers and the IT infrastructure that runs a business, primarily it's geared around Unix.

So this is the operating system that started at AT&T. It was passed on to Novell and eventually acquired by SCO. And this is what is at the center, the intellectual property rights and the contract rights around this operating system that were started at AT&T and passed on to SCO, is what we are talking about. We paid a hundred-plus million dollars along the way to get the rights to this, and that's really at the center of attention of the battle.

There are a lot of people out there making a lot of opinions as to SCO's ownership around Unix. Again, when you go look at the winding road, that's one question. The other question is, when you get there, you read through these contracts, what do we have? OK. What I'd like to do for you right now is to lay out just in real simple terms, rather than going through all the details of all the contracts we have here...the basics of what is netted out of all of those contracts. So the first thing is there's this thing called Unix System V which is basically the commercialized version of Unix that AT&T passed along, and that is the...we own the source code. So when you think about code, you think about object code, or binary code, and source code. Source code is the one that you program with. That's the valuable underlying crown jewels.

You go to the next point here. SCO owns the agreements to all the Unix vendors. So whereas Bill Gates and Microsoft is very monolithic -- they own Windows. They own the code. It's theirs lock, stock, and barrel; they've driven it singularly as one company. The way Unix played out was you had Unix, that was then partnered and licensed out thousands of times. The source code to Unix was licensed over thousands of times by AT&T. So, how common is it to license source code this broadly? The answer is not very. We're going to come back to that point in just a moment.

The third thing that SCO owns is the Unix System V copyrights. We...as part of this agreement, if you go to the original Asset Purchase Agreement, what you'll see is eight pages of copyrights that came to SCO. There was an amendment to that original purchase agreement that came on a year later that basically reinforced that we did own those copyrights. And now, you're going to hear, if you come to this room here in two weeks, from a company that has stepped up and claimed ownership to those copyrights. So we bought the property from Novell, and now within the last six months, Novell has gone out publicly and said, "Wait a minute, we didn't sell you the copyrights." OK, so we disagree violently over that point--violently to the point that we filed a lawsuit two weeks ago against Novell to reinforce our ownership claim to them.

Now, why did we file a lawsuit against Novell? We went to the copyright office and registered our copyrights. Is anybody here a copyright holder? Anybody gone through this process? Tell us what the process is. What do you do?

Right. Yeah, if you could speak in the mike for us, that would be great.

Audience Member: So if you were specifically speaking to the registration process, you just provide them essentially with a copy of the work, and you fill out some forms, and I believe we had to pay a small fee when we did this. It's simple.

McBride: What was this, a book or software code, or what was it?

Audience Member: It was, yeah, essentially software.

McBride: So you developed some software, you registered it, you sent it in to the Copyright Office, you paid a small fee. And then what did the Copyright Office do?

Audience Member: Well, essentially the net result of that as I understand it, and I'm not a lawyer, is that we received basically, essentially, additional legal protections from someone who infringes on that.

McBride: Did you get your certificate back?

Audience Member: Yeah, exactly.

McBride: Was it kind of cool when you got it?

Audience Member: Well, my partner has... handled most of this, but yeah, I guess. He talked about it a lot.

McBride: So it's cool. You get it, and it's like, wow, I've got a copyrighted work now ... piece of paper.

Audience Member: Well, it wasn't as cool as knowing that there were certain legal protections that came along with it.

McBride: That's the key part. So I've got a piece of paper, I have certain legal protections and the copyright office granted this to me. OK. We went through this same process as you and your partner did last July. In fact, one of my partners here, Chris Sontag, will join us on the Q and A, who runs our source licensing division, was responsible for that, and when the registrations came back, it was like, cool, right? Remember when we got those back?

So a few weeks ago, I guess it was in December, we got word that Novell had gone into the Copyright Office after we did and had filed for copyright registrations on the same works that we had already filed for and had received registrations on. OK. And guess what the Copyright Office did?

[inaudible from the audience]

McBride: Granted them a copyright.

[inaudible from the audience]

McBride:So...Exactly.

[inaudible from the audience]

McBride:It's a registration. OK. The copyright... the net of this story is the Copyright Office does not -- unlike patents -- vet out the validity of the claim. OK. What was your name ma'am?

Audience Member: Diane

McBride:So, Diane, if you went into the Copyright Office tomorrow and filed for Unix copyrights, the same ones that us and Novell now have a piece of paper, what would happen?

Audience Member: I'd get it.

McBride: You'd get it.

Audience Member: Plus, I don't even have to show them the whole thing.

McBride: You don't have to show the whole thing. So now we'd have three copyright holders. OK? We filed a lawsuit against Novell. So then we went back to the Copyright Office and said, "Woah, timeout. Who's the referee over there? Somebody's got to step down and fix it. We feel very strongly about this point, we have a piece of paper, a contract, that they've transfered these over to us." OK? And so what do you suppose they said?

Audience Member: Go to court.

McBride: Go to court. That's why we went to court two weeks ago. We sued them for slander of title. And we're going to be working through that process here. And the court system is set up to referee that situation. So that's what's going on.

I'm getting a lot of, you know, legal education along the way here. Not as much as obviously you're getting here, but on some specific issues it's pretty interesting to learn this stuff along the way.

The next thing SCO has ownership rights on are the claims for violation of all Unix licenses. So we have these six thousand contracts out there and in our contract that we got from Novell, it says that if anybody violates their contract as it relates to Unix source code, any claims for damages are due to SCO. And then finally it says that if you create a derivative work on this source code, again the control of that is owned by SCO.

If you go back and look at what AT&T did when they created this licensing program, they had a notion of getting Unix far and broad, they wanted it to go around the world. Let's really spread Unix. Let's make it become a world-wide phenomenon. But at the same time, let's control it. I mean these two objectives are working against each other. When you take source code and spread it far and wide, how do you keep control of it? How do you keep control of the derivative works?

The way they did it was with very strongly worded confidentiality clauses that were in the contracts. So if you look at the actual contracts which we won't go through right now, but we have some copies right here, you'll see that these are strongly worded devices that are designed to keep this harnessed in over the years. If you look at the contracts that SCO has, you see that we have the ownership rights around the core Unix IP that runs down the trunk of this [chart] -- so in other words System V -- and then you see all these different companies that have created derivatives. They've gone off and taken our System V code and created a derivative work.

[30:00]

Now the reason that we are in litigation with IBM -- they are one of these licensees. And what we claim is that they have taken important key parts around one of these derivatives, their version, they have two versions, AIX which is the one they've natively held, and then Sequent Dynix which is one they acquired in the late '90s. The key portions of this code that was protected under our rights has been taken by IBM and donated into this Linux environment.

So, you all heard about Linux, I won't go into that whole detail. But Linux then is the operating system for free started by Linus Torvalds back in 1991. Donated to by thousands of people around the world, but significantly donated to by major vendors that have contracts with us.

If you look at the effect of Linux ... from a ... over the last four years, if you look at where it was in 1999 versus where it is right now, you see a quantum leap up in terms of the capabilities. Whereas in 1999, this was a hobbyist level technology, very simple multiprocessor capability and moderate degrees of reliability. When you look at Linux today -- the 2.6 kernel just released here in December -- you see enterprise-level performance: you see 32-way multiprocessor SMP configurations, 128-way NUMA configurations, high degrees of reliability. In other words, you can take Intel processors with today's versions of Linux, and because of contributions major vendors have made, establish a supercomputer-level configuration, with Linux as the base operating system.

It took the Unix environment, development environment, 25 years to get this kind of capability. Linux has got there ... has been able to get there in just a few short years. So that's at the heart of our IBM lawsuit.

Now, after we filed a lawsuit against IBM, they countered against us. Basically at the core of their counterclaim against us was this thing called the General Public License. And if you look at the General Public License, you basically see an instrument there that is designed to make software available for free. And because we were involved in the Linux environment along the way -- we're not currently -- then their claim is, Oh, you gave all this stuff all away.

If you look at some of the issues that surround the GPL, we think they're fairly significant. The founders of the GPL, the Free Software Foundation, have this notion of Copyleft, and Copyleft is designed to be exactly opposite of a copyright. Whereas a copyright is designed to protect your property, to be able to give you proprietary rights, something you can go license and charge a fee for, with a copyleft, the idea is, This is a free work. It's something that you don't charge a fee for, and in fact, over time you have everybody, sort of getting into this free sharing mode of software.

They believe adamantly over there that proprietary software is evil. I mean the words they use there is evil, that proprietary software is bad for the world. Those are the words that come out of the free software camp.

That issue becomes significant because again if you go back to Eldred v. Ashcroft, these same arguments are made in the Supreme Court hearing. And in the majority opinion, again I forget which Justice wrote this. Is it Ginsberg? The statement is made, the copyright law celebrates the profit motive. And in fact, the profit motive is the engine that ensures the progress of science.

The copyright ... the GPL has had no significant court test up to this point. IBM has put it on the table in our case, and we expect that it is going to see a major court test as we go through our litigation with them.

To speak again back to the minority opinion, Justice Breyer's opinion was that copyright statutes must serve public, not private, ends. The majority response to that was, this misses the mark.

[35:00]

Copyright law serves public ends by providing individuals with an incentive to pursue private ones. So I think, again, this is a major issue that we're going to see coming out as we go through the litigation battles.

Now another really key, interesting point about this General Public License is the lack of indemnification. We are moving now through our court-related issues. You're going to see a -- we basically, we have a litigator by the name of David Boies you may have heard of. And as we go through our situation with our feeling that in the IBM case we had our contracts we felt were being violated, in the copyright situation, the question is, who you go after?

The open source software world is very interesting. There is a string of players there. You have Linus Torvalds that accepts a bunch of changes, a bunch of code, includes them in a version of software. Then it comes down to distributors of the software like Red Hat and SuSE. Then it comes down to a hardware player like an IBM. Eventually it ends up in the hands of an end user. But if you read the GPL language, it says, so if you're a user now, a buyer, I guess you don't buy because you're receiving it. The GPL language when you get a Linux license says because this program is licensed for free, there is no warranty. And so the entire risk on this is on your shoulders. So we have basically said within the next few weeks, by February 18th we are going to be in the courtroom with an end user to go through the copyright-related problems that we are having from an infringement standpoint.

The free software response to SCO is, You guys are crazy. This would be like -- I believe Professor Moglen was quoted as saying, This would be like going to Barnes and Noble, getting a book, going home, and while you're sitting on your couch in front of the fireplace reading it, you know, SCO comes in and sues you for reading the book. Well, that's lunacy. You can't sue someone for reading the book.

OK, but I would point out, there are two major differences, in the case of Linux, compared to his Barnes and Noble example. The first major difference is that you didn't buy the book in this case. Let me grab my GPL license here. In the case of Linux, again, as it says here, this is licensed Free of Charge. So you didn't actually pay anything for the work.

But at the same time they gave it to you, they said, By the way, if somebody comes after you because there's a problem with this, if there's an infringement, if there's a problem, then you're on your own, don't come back to us, because you... we didn't receive any compensation. You're on your own.

The second major issue is that in the first example, when you sit at home reading the book, it sounds fairly innocuous. If you look at how Linux is playing out in customer environments, when people receive Linux, they don't typically just receive it and use it, they typically receive it, use it, and then copy it. Many of the organizations we looked inside of have gone out and got a license for Linux, and they've copied it around another nine or ten times for each version they receive down. So this would be like the Barnes and Noble user reading the book, enjoying it, getting up, and then going out and making 500 copies and spreading it around to their friends and neighbors. OK?

That's our point about it being a copyright problem at the end user ... at the end user level. And so, again, on these key points, we're going to be highlighting them in some end user lawsuits, and again the courts are going to be helping us sort through all that.

As we have put these plans in place and stated that we are going to be going into the end user litigation side of things here soon, a number of vendors have stepped up and said we're going to provide "SCO protection." OK. If SCO sues you with a lawsuit, we will provide you protection. Now typically, the protection revolves around, you pay us some money, then if SCO sues you, then we'll give you some money back.

In Novell's case I believe, you know, they give you a bit of a premium on what you pay them. But at Linux World here a couple weeks ago, a prominent technology publication was saying all the vendors were trashing each other's indemnification programs. Basically, what you start realizing here is that this free software is starting to become not so free. You know people are now going to users, saying you need to pay money and then we'll step up and protect you.

[40:00]

As we come back to the backdrop to all of this, and again, as we start talking about some of the sideshows and some of the corollary issues that are coming into play in our case, you see some interesting problems starting to pop up here. You know, take this MyDoom virus. Anybody get MyDoom showing up in their mailbox? Yeah? Did anybody actually get infected? Oh.

Audience member: I use Linux so I did not.

McBride: [laughs] You're in Linux, so you did not.[audience laughs] So.[points to another audience member].. Thanks.

So, you got infected, and so you were part of the guys who were hammering our web site yesterday then. Thanks a lot.

You know this MyDoom virus, we don't know where it came from. We've been attacked on our website. We've had four DoS attacks on the SCO website in the last ten months. OK? On one of those occasions one of the Linux leaders stepped up and said, It was one of us, a senior member of the Linux programming community, and he shouldn't have done it, but he did. [Chart behind him says "The Age of Cyber-Terrorism".] We don't know where this attack came from; we don't know if it was spammers from Russia.... I understand Darin just came back from Russia and you were there the day that the thing launched, right?

[inaudible from audience]

OK, I just wanted to highlight that coincidence. We do have a reward program, you understand.[audience laughs]

So you've got some interesting things going on. You've got these denial of service attacks, you've got worms, you've got viruses, you have international terrorist threats, outside from cyber-terrorism, you have actual terrorists out there. There's an article that Rob Enderle wrote today where actual hard-core terrorists are now getting involved, kind of scanning - getting involved in the digital terrorism side, which becomes a very scary thing. And then on the top, here you have your basic harassment, civil disobedience, and different things coming from email and web logs.

There was a second DoS attack that was launched yesterday. Did anybody hear about that one? The Microsoft DoS attack is scheduled for tomorrow. There was another one that hit yesterday. It's a little-known one, but I personally know about it because it hit my house. OK? Somebody went out on Slashdot.org, which many of you have heard of, and they were kind enough to post my name, address and telephone number, and they launched an attack on my home phone. Right while I'm trying to enjoy the Super Bowl, the phone was ringing off the hook. OK. And it drove my wife crazy. I mean, she's been dealing with these things for a while now -- we've had all kinds of threats and different things -- but she finally started calling these people back. It was like, "Time to fight back."

So there are these kind of issues that at one level you say, Well, big deal. One guy got bugged at home. I think what you see here though, is there's a new frontier out there. And if you look at the digital age and what's going on right now, I view this as a digital frontier. And if you look back at the Western frontier, there was a period of time when there was a lot of lawlessness. A lot of the things we're talking about here is just outright lawlessness.

Some of it is fairly innocuous and it doesn't harm very many people. Other things that are going on are very harmful. Did anybody see the Mi2G numbers in terms of how much this MyDoom virus was responsible for in the last week? The reports coming out of London was $26 billion, spelled with a "b". That was shocking to me. I mean, I still don't know how they get those numbers. But, no matter how you calculate it, there was a lot of damage done, a lot of people that have been basically injured and had economic damages as a result of this virus.

From our company's standpoint, obviously it was a big deal. On Saturday night web traffic started to flood our website and by midnight Eastern time Saturday, our website was flat on its back. We launched an alternate website this morning, so we're now up and going and, you know, that's ... we have a number of contingency plans in place for dealing with the problems as they come up.

But I think there's . . . I see there's an underlying problem here just overall. You have a rule of law out there that is set up to deal with problems. We have problems, we went into the court system and that's the way we're working through our problems. We have people that are fighting back against us that are trying to use intimidation and fear tactics, to try and shut us down from the court system. So we're fighting back. As Lombardi said, and since we're at Super Bowl time, "It's not whether you get knocked down, it's whether you get back up again." Okay. Our site got knocked down Saturday night, this morning we got back up. We're taking on a lot of fights, a lot of issues right now, but we're gonna continue to fight for what we think is right here.

If you look at some of the other issues going on, this whole area around export control... People say that we're alarmists because we're communicating with Congress around issues where... As a proprietary Unix operating system vendor, we have very tight export control restrictions. We can't send our software, for example, into North Korea, Libya, etc., there's a number of countries there that are restricted. And now we have a situation where those same technologies have been put into an open environment, into Linux, where these same people can go download and get this available for, not just that you can get it for free, the fact that you can get it at all. And so, we think that there's some serious issues around the controls that are lacking as it relates to Linux and open-source systems.

[46:34]

We put the bounty program in, you know somebody said, Well, that seems like a new thing. No, it's an old thing. That's what they did in the Wild West days. And it's very difficult when you have a website here, sco.com, and you have a perpetrator over here and you have multiple layers of networks and computers in between, it is very difficult, even for some of you smart MIT guys in here, it's very difficult to track down where these launches actually came from, where these attacks came from. And so, the thinking was to put in a bounty program. We put up two hundred and fifty thousand and we'll see if, if that's effective or not.

[47:14]

So, if we look at the future... This is the last slide, then we're gonna go to Q&A. If you look at the future of software, where are things going? On our left here, that's my left, [slide] you've got Richard Stallman, who is the head guy over at the Free Software Foundation. That's gotta be nearby here, not too far away, I guess, right? I first heard about the Free Software Foundation and "GNU is not Unix" all the way back... When I was at Novell, we bought Unix back in the 90s. I mean Richard's been at this for a long time. And I actually highly respect Richard's ethos, is who... I mean he is very strong about one thing, which is he's not done until all software is free. I mean that's very strongly his opinion. I totally disagree with it, but I respect his opinion.

[48:18]

On the other side you have the intellectual property organizations, and there's a pamphlet you can read on your way out, or pick one up, that talks about intellectual property as a power tool for economic development. And in fact IDC is projecting by the year 2007 the software market to be 289 billion dollars. Now the question that I would pose to you, going back to one of the early slides, what is the value of intellectual property? What is the value of software? What happens to society if, if the 289 billion is zero? Any economists in the room? I would argue that is a very bad thing for us and for society, for the tax base, for the ability to have an incentive to go create more and more software.

And so, I think as we go forward, this is going to be a very key issue that... It blends technology and the law. I think it comes down to, Can you protect your works? In the future, is the current stance of the U.S. Congress going to be held up? Is the progress of science going to be advanced by leaning more towards individual rights? Or are we going to create a commune where everybody throws all their stuff in the pot and says, It's all over here and it's all for free. Okay? So, I...

[49:45]

Again, going back to the ad that was run here today, IBM's position on this is very clear. This is another point that I agree with them on. The battle right now is over open versus proprietary. Okay? IBM is saying open is good. It's about open standards. And they're trashing the world of closed environments, proprietary systems. The ... so I agree with them that that's what the argument's over.

[50:20]

And in terms of where we go forward, clearly we're on the proprietary side. We believe we have very significant proprietary property rights, and we're protecting those through the legal system.

From IBM's perspective, they hold thousands of patents, I think the number is around ten thousand patents. I would say to Sam Palmisano, the minute you put your ten thousand patents into the public domain, I will follow you with my intellectual property.

So with that, why don't we go to Q&A?

Zarren: This is Chris Sontag. He is the Senior Vice President and General Manager of the Licensing Division, is that...?

Sontag: Overly long title.

Zaren: I just ask to please be respectful in your questions etc. We'll take the first one over here.

Question: Your talk confuses me. On one hand, you argue that you've got some proprietary technology that's copyrighted that was stolen, and that's perfectly reasonable. Then the rest of it seems to be FUD talk, which I get the impression, free software is bad and shouldn't be allowed is the message I get from what I hear here and what you've said elsewhere. And I don't understand that. That's sort of like saying, you should only be allowed to sell music, and nobody could put a song out for free. Am I misunderstanding what you're saying?

McBride: You bring up a good point, which is, I'm not saying it's bad for someone to contribute their works, OK. I'm saying it's bad for someone to contribute my works and say I'm going to commoditize and destroy your business against my will.

I am not saying... When I said I respect Stallman, I believe that Stallman would horrified, if this thing comes out, that property that is protected is showing up as a part of GNU/Linux, OK.

I believe that at a voluntary level, anyone who wants to contribute, if IBM wants to put INFORMIX in there, if they want to put anything in there, OK, that doesn't violate my rights, God bless them.

Ourselves as a company, we've put things in there, OK. Those are not the things we are arguing about. But I do believe that as a society, we're on a very slippery slope right now, if we move down this path of saying, let's all jump on the software is free, and software is good, movement and let's just make all software free, because I've had my eyes opened, in the last year or so, that I think that is a slippery slope, and it doesn't have a good destination.

Question: I've got to use this new-fangled technology here. So my name is Eric Jonas and I am a student at MIT, and in fact my friends here, we're also all MIT students, and we are all essentially engineers and scientists. So intellectual property is extremely important to us. Because this is all we are ever going to do, with our lives, right?

Mcbride: Sure.

Question: So what I don't understand... Well, first of all, in our own act of civil disobedience, you mentioned people copying Linux many times. We actually gave out copies of Linux to everyone in the audience today. If you didn't get a copy, feel free to see me afterwards, because we truly believe that the intellectual property foundations of GNU and the GPL, are very strong.

But, amongst the millions of questions I would like to ask you, my number one is, you've been telling people that you believe that your intellectual property has been contributed to the Linux kernel all night. This seems to be the most substantial portion of your talk. But I am curious, if the code is already out there, if in fact -- I have a copy of the Linux 2.6 kernel right here in my hands -- what do you have to lose by telling people, Well, these are exactly the parts that are infringing, because as I understand it, and in fact Linus Torvalds has said himself, you guys refuse to tell people, except under NDA , which portions you believe are infringing. Now I am not a lawyer, but I know that if someone was doing something that I felt was harming my rights, I'd try and stop it as quickly as possible.

McBride: Let me take a first shot at that Chris and if you want to follow up.

Sontag: Sure.

McBride: Have SCO shown the code? OK. First of all, SCO owns intellectual property at System V level. When we say we've licensed this thing six thousand times, we've licensed it and people are under very tight restrictions about not being able to show that.

If we go out and just throw it out in the public, we are basically violating our own commitments we have with our licensees. Now, with respect to code that we have shown, let's follow the bouncing ball here for a moment.

[55:00]

Last summer, we came out with code that was very clearly replicated and showed that last August. It was done under NDA, because we didn't want to violate our own agreements. A number of people saw it, and shortly after that a Linux leader, in fact Linus came out and said, That code has been removed from Linux. We then had some other code that tied to it, that Silicon Graphics came out and said, That was System V base code; it wasn't supposed to be in there; we took it out. OK? So there's two occasions. Again, SCO said it was in there, wasn't supposed to be in there; they took it out.

Now they didn't take it out of the thousands and millions of servers running around the world, so even at that level, you still have an infringement problem. But they did take it out of future versions. We then said, there is roughly a million lines of code tied into contributions that IBM has made, and that's subject to litigation that is going on. We have basically supplied that. In fact, that is going to be the subject of a hearing that comes up this Friday in a Utah courtroom. We have supplied them with ample evidence, in terms of where those infringements came from, and then finally a month ago we came out, or December I guess it was, we published 75 header files that showed up inside of Linux that tied to not just our intellectual property agreements, but to the BSD settlement agreement from back in the nineties. And the settlement agreement says -- What does it say, Chris?

Sontag: It says basically that there is a set of files that had to be removed from BSD. It was a set of files for which copyright attributions to AT&T USL, and effectively SCO, had to be placed on all those files, and there was another set of files for which there was no issue. Those files that were, had to have the copyright attributions; portions of those files ended up in Linux -- which is a problem. Which means we have copyrighted work that was part of a court-approved settlement, that have ended up in Linux inappropriately, and we haven't seen any action to correct that problem yet.

McBride: We did send out letters notifying people to your point. We did send out letters in December. We said we are concerned about this. And the deadline for responding to that was Saturday.

So if you look, when we say we're moving down the path of litigation, we are doing things to try and mitigate. We are trying things to try and get things resolved. And we'll see how that plays out.

Zarren: There's a button on the bar you can press.

Question: Sorry I've never been here before. Hi. I'm very concerned about the argument you're making against Free Software because the reason Free Software is so valuable is because it provides the basis - the substrate - upon which other software, whether Free or proprietary, is built on.

And it seems to me that by creating Fear, Uncertainty, and Doubt in the filing of your lawsuit, you're doing the opposite of promoting the sciences and useful arts. You are trying to undercut the basis upon which much science and useful art is being built. Furthermore, you're not the author of Unix; you're not the developer of Unix; your company had nothing to do with creating Unix. So why should anybody in this room support what you're doing?

McBride: Any contract lawyers in here?

Question: I... Not yet.

McBride: Again, if you go back and read, very clearly, the contracts, did Chris or I develop Unix? No. Dennis Ritchie and Ken Thompson did.

Sontag: And many others.

McBride: Yeah, and so from the latest copyright legislation out there, those copyrights are good for 70 years, plus the life of the inventor. We're sending those guys vitamins and spa treatments every day. No, we didn't create them. But we paid millions and millions of dollars to acquire them. From a contract standpoint, there has to be some meaning assigned to a piece of paper you have that you paid millions of dollars for that says you own all right, title, and interest in Unix. It says those words.

OK? From a standpoint of your first argument, which is the Free Software side of it - again, we're fine with Free Software. We're not fine with somebody taking our proprietary software and making it Free. And that's all we're trying to say.

Sontag: Let me just add one thing, two points, to that. One is in Free Software, the concern is with the extremes. If we're going to end up as a society, a world society where the extreme of "all software must be Free" -- we view that as being problematic.

The second point is, in terms of ownership rights, you know, most of us here probably didn't build our house, or didn't build the apartment that we live in, yet we still have rights in terms of that property. So the fact that Darl or I didn't code Unix is immaterial. The fact is that we've purchased that house. We've purchased those rights. And we have the right, title, and interest in that business.

And so ownership is important. Property rights are important. You know we're talking about software; that's somewhat intangible right now. But ultimately we're talking about an issue that can be stretched to all sorts of other things. Your right of your ownership of your IPod. Can I just walk up to you and take it away from you? What is my right? I want it so I should be able to take it? How far do we stretch these issues? Right now we're dealing with software, or music, or with a play. But at some point we're talking about physical property rights. And at what point is society's rights, individual rights balanced. And that's what we're dealing with and we're trying to deal with it in the court system. And not deal with it in terms of being beat up in a web attack or other things. So.

McBride: Let's go here and then back over here, 1, 2, 3.

Question: Assuming, let's assume that your claims about SCO's ownership of copyrights are held to be valid. Is it then possible to clean Linux of that code, or are we all in kind of limbo until we know all this winds up in courts and we know it's legal? Because apparently much of it was created as free software, without the contributions of code that originally came from Unix. Is it possible to go back to that state, or would the act of doing so reveal the code that you're forbidden from revealing by your licenses? Would ...

McBride: Part of the reason that I got into the licensing program is that we had people actually asking that question. "Is there some way that I can license this from you and feel free that I can just run this stuff irrespective of what happens in your court case?" If you look at Unix and Linux. If you go down to the bookstore right now, and look for a book on how to program in Linux, typically they'll say how to program in Unix slash Linux. OK? Making the point that Linux is a clone of Unix.

We absolutely recognize that there have been many contributions many works, starting with Linus and going to many people around the world that we don't have anything to do with. And we're not trying to say we have anything to do with it. All we're trying to say is the property that we feel is in there, that is violating our rights, we want to get compensation for that.

Question: But if people agree with you, they agree your property is in there but they don't want your property, they just want everything that's not your property. How can they get that? How can they go back to the free... at some point, somewhere in the beginning there was a Linux that had no proprietary code in it because it was all Linus and anyone else who was making free contributions. Along the way there've been many similar contributions, so how can we get back to that?

McBride: Let me answer your question. So what we've said is like, in the case of the IBM code that we claim is in there, that we think is material and we say it goes into a high-end high-powered processing system, we think that if you rip that code out, it's going to make Linux not nearly as attractive. But if the common wisdom is to take that out and to go down that path, assuming we win that court case, then absolutely that's something we'll sign up for.

Question: Hi, I understand that you insist on the respect of copyrights. And I think everyone in this room would agree with you on the respect of copyrights. However, SCO's currently distributing GPL software products such as Samba in some of own SCO products. Since you believe that the GPL is invalid, I was wondering under what license are you currently distributing Samba and other such products?

Sontag: We, Darl's mentioned earlier that SCO has participated in many open source projects, has made contributions to open source projects, doesn't have issues with open source projects that the IP basis of that work is sound. Same with our participation with Samba and with other GPL or other open source projects. So we continue to participate in some open source projects, Samba being one of them. And we do have concerns with the GPL, and the GPL may have to be reworked, changed, a new license put in place. But in terms of ... as far we are aware right now there are no issues in terms of IP with Samba that we're aware of right now. And so we continue to participate with that.

[65:00]

In terms of the Linux kernel we specifically have an issue, and that is a completely separate problem, so you can't drag it to the extreme and say 'urp', therefore all other projects all other issues are completely out of bounds. We've participated, we will continue to participate. So as far as we are concerned right now, until we have evidence to the contrary, there are no issues as far as we are aware of with Samba .

Question: Hi. My name is Ben [inaudible] from MIT. You are right that the GPL has not been tested in court but then I would say neither has your claim about copyright. At this stage your claim about copyright over Unix which you are more than welcome to make has not been proven. At the same time you kind of cherry picked various opinions from the open source community and blamed the whole community for these random little attacks, but the actions of your company, SCO, as an entity have included tactics such as sending letters to various users of this software and, as a company, before your claim to copyright has been made in court you've tried to intimidate people into paying you $700 -- at a discount price -- for Linux and $1,200 at the full price, and you make this claim based on this idea that the GPL has this warranty disclaimer which has no relevancy whatsoever to copyright. It is about the way the software functions, not about the copying of the source code. So how do you justify going after people before you've made your claim, going after users, people who believed they were in the right because they dealt with Red Hat, because they dealt with SuSE and acquired this software, and how do you justify that kind of action?

McBride: Well, I think you bring up a number of good questions here. Let's go back to the first one which is our letters to users saying that we have a problem and pay us money. If you look at the letter we sent out back in May we didn't say a word about paying any money. We said we feel like we have intellectual property problems inside of Linux. Your point that this has not been tested with end users, we ... is a good one. We are going down that path. We've said that we're going down that path and we're are going to test that, and that is coming up in the next few weeks. The question earlier is, what are you doing to mitigate your problem, what are you doing to let people know you have problems? We sent out letters in December saying, specifically people have clamored saying SCO won't even show where the code is. We sent out letters that said here are 75 files. Linus stepped forward and said two of those he did and did not comment on the other ones, not to my awareness, maybe he has, but on the one that I saw he said, Two of those I remember writing myself. Great. Somewhere in America there is going to be a judge that is going to sit down and the rubber hits the road when you get into the court system, and we are going to be there. And so on the contract issues we have various contract claims with various vendors, we have isolated them down to IBM because we feel that is where the biggest area of concern is. On the copyright side and on the end users' side, we will be in a courtroom somewhere in America soon and that will play out. There was a question back up here. Oh, right here. Go ahead.

Question: Thanks. I am Derek [inaudible] a third-year student here at Harvard Law and we would like to thank JOLT and thank to you for bringing the debate here to campus. It's great. My question is, if we assume for a moment that you prevail in the suit against IBM and that you hold a copyright such that Linux has infringed, if I go to the COOP and I actually purchase a Red Hat box, a boxed version, or over the internet, or somewhere I buy a PC that has Linux pre-loaded on it, would it be your position that by either installing the operating system on that Red Hat CD or by using the OEM version of Linux that I have violated your copyright?

Sontag: Our opinion is that if it's proven that our intellectual property is in Linux and -- I'd like to separate out two points -- one, you are dropping it all into our case against IBM, which is a contracts case involving their violation, as we have alleged in our lawsuit, certain portions of the contract, specifically confidentiality of material, derivative works, those sort of things. So, let's separate out the IBM case, and that stands on its own. In terms of separately copyright issues, let's say that is proven as we go forward, with, as we prove our copyright issues, we would have a basis to then come back to, as we've stated, commercial users of Linux. If you are using it for educational purpose, we are probably not going to deal with you. If you are using it in a large commercial environment and getting a great deal of economic benefit [from] the use of some of our portions of our intellectual property, we will probably have an issue with you, and at some point we may choose to enforce those rights. So that's what it comes down to.

Question: Hi. Question involving another local company with whom you are having a bit of a run in. Well, they are a local company now, Novell.

McBride: Right.

Question: Just announced, by the way, last week, they are now officially a Massachusetts company.

McBride: It was through their 10-K, I understand ...

Question: That's right.

McBride: ... they announced.

Question: That's right. Yeah, so they are now local boys.

McBride: Right.

Question: Anyway, they've got an interesting little approach to this. They say, We still own a permanent, irrevocable license to SCO Unix as part of the deal with you guys. So then they turn around and say they say, Now we've just bought SuSE, the second largest Linux developer. We're going to sell SuSE Linux. And if any legal problem comes up, it won't apply because, hey, we have a license to distribute SCO Linux, SCO Unix, so any copy we sell is clean. What do you make of that argument?

McBride: We make a lot of things of that argument, but ...

Sontag: You want to take the first cut, or...?

McBride: Yeah, ah, let me take the first wave.

It's interesting -- you actually used very good words there, very precise words. They say they have a license. They're a little, talking out of both sides of their mouth here a little bit. On one hand, they say they own the copyrights. They went to the Copyright Office and said, We own the copyrights. But on the other hand, in the public marketplace, they're saying, We own a license. OK? They, they licensed back the technology. They sold us the technology, and then they took a license back. It's bizarre to say you're owning the copyrights at the same time you took a license back from the people that own the property. That's the first interesting point.

When you dive down in and you do a thorough reading on all the contracts there, what you see on the license-back portion says that they received a license back to use the technology for a) internal purposes, or b) externally so long as it does not compete with the core products of SCO. And it's a substantial part of the value proposition of the packaged product. So, that becomes an interesting question. Our product is Unix. Does Linux compete with Unix? OK? That is going to be a question that the courts are going to be settling on that front. Right now, we're just very singularly on the point of copyright ownership issues, and, you know, that's, that's why we filed the lawsuit.

Sontag: I guess the one thing I would add to that is, you know, many of you are in law school or have completed law school now. If you think back to your contracts classes, do you interpret a legal contract in terms of the whole document, that the basis of the contract is the whole document, or can you interpret it based on selectively just a few lines that are of, you know, most benefit and desire to you? No, it's the whole contract that matters. And so, what, unfortunately, [it] appears Novell is doing is selecting out and cherry picking the best parts of the Asset Purchase Agreement with SCO and trying to spin that out there and create confusion. And, we'll have our day now in court to settle that issue with them, and we're very confident of our position because, in two areas, one in terms of the copyrights, and second in terms of this, you know, perpetual and irrevocable license.

Only thing I'll add to that is, there was a perpetual and irrevocable license that Novell would obtain based on their license back, if SCO had been purchased within two years of when Novell sold to old SCO, the Unix business. Well, old SCO was not purchased or there was no change of control that occurred within that two year period, so that unlimited perpetual license back did not occur.

Also, in that same contract, there is language that says if Novell ended up competing with a business that is substantially the same as what they had sold us. So they had sold us this Unix business, and then turn around now with their SuSE Linux business are competing with SCO. There is a limitation of their license where it becomes substantially less and incapable of supporting their, you know, desired license to a broad audience of rights they really don't have.

[75:00]

McBride: OK, let's see, we haven't got any on this side of the room, let's go over there...

Sontag: How are we doing on time? ...OK...

Question: One quick question. We've talked primarily about companies owned and operated within the US. I just wanted to get a sense of the international implications for your arguments. Specifically China, for instance, an emerging market, particularly in the desktop realm. And where do you guys fall from an intellectual standpoint, and who do you appeal to to make sure your intellectual property rights are protected across the world?

Sontag: Want me to take that? All right. If you're familiar with, you know, copyright law, there is a lot of international conventions and so on that have established, you know, bilateral agreements between different countries in terms of respecting and enforcing each other's copyright laws. So, most of the major countries around the world, there is effective, you know, reciprocal action. If you have a US copyright and have registered it in the US, that you have a very high level of rights in many other countries around the world. There are a few exceptions to that, a few countries that do not fully recognize copyright protection or don't see the value of copyright protection or other intellectual property rights protection. Which, you know, as a world body will continue to be, you know, worked on and hopefully corrected. But for the majority of the major countries around the world, we have a very strong basis and mechanism for being able to enforce our copyrights and other intellectual property and contracts in just about any place around the world.

McBride: Except China.

Sontag: Except China.

Question: Yes, hello. I just have a couple of quick questions in regards to the concept of copyright to specifications and, like, well, as a programmer, header files or interfaces as opposed to the actual implementation. For example, when you're sharing software, particularly for collaboration, you will publish an interface, but you'll keep your implementation private. And if some other person chooses to implement that, they can, and then, they stand up on their merits. Does copyright apply to both, and if so, if the interface is made part of a public specification, can that then later be claimed as part of the copyright, for your own implementation, thus making the implementation of that specification by a competitor invalid because it's programming to the same copyrighted interface?

McBride: It's a great question, and...and...

Sontag: If we have a couple of hours, we can, you know...

McBride: The real simple answer is, if you go through and look at the...there was a big court case back in '94 that was settled between AT&T and BSDi around the very issue of, you know, different versions of Unix and how much was over here and how much was over there. And one of the things that came out of this, as Chris said earlier, were 90 some-odd files that were protected for SCO, or for AT&T at the time, and a number of these were tied into these header files for the interfaces. OK. So it reinforced the copyright protection, these transferred over. We do have those copyright protections, and that in fact, so the way it reads is, a lot of these files in BSD, if they put the files in, they could use them, but they just had to include the header information. They had to give attribution notice to us.

If you look at the DMCA, it actually gets to this very issue, of if you file off copyright header information, that's a violation under the DMCA. There's a company out there that we used to be associated with, called Lineo, that was sued by a Linux company called MontaVista over this very issue. You took off header file information. Lineo ended up paying in that case. So, this is exactly the same case that we're on, and we feel that we have very strong rights.

Who hasn't asked one yet?

[Zarren raises hand]

You...you take control of...

Zarren: I'm going to ask a question.

Sontag: You're going to take privilege here.

Zarren: Exactly. It's one of the fun things you get to do when you're in charge of a journal. So, basically there's two sets of claims that you're talking about here. One is a copyright slander--which shouldn't be confused with a different kind of slander--claim, against Novell, and you're going to figure out, that case will figure out who owns certain copyrights. The rest of the claims that you're talking about here, as I take it, are all revolving around the factual question of, Do certain lines of code appear in Linux or not?

McBride: Against our property rights and the confidentiality disclosure standpoint.

Zarren: OK, so maybe there's two pieces there, one's a contract issue...

McBride: Breach of contract, right.

Zarren: ...because they disclosed and shouldn't have. And the other is over just straight copyright violation, or not?

McBride: Right.

Sontag: Not through IBM.

Zarren: But the end-users might conceivably violate...

McBride: Right. Exactly.

Sontag: ...but from other sources.

[80:00]

Zarren: Then the question that I have is this. Let's say, again, I'm not a copyright lawyer by any means, let's say it were to be the case that the courts say, No, these were sort of developed independently, it happens to be the same, but for whatever reason not infringing and not exactly your code. What happens to all these claims then? Do they, do you have other claims, do they exist, or is it really just rest on...is it the existence of these particular lines of code in Linux, yes or no? Is that the basis for most of these claims? That's my ... does that make sense? ... slightly complicated question.

McBride: No, it's a good question, and I think the basis for our claims does revolve around the growing up of Linux so rapidly and how much of that relates to our contract rights or our property rights or not. Again, when you come back to the point that Linux is a clone of UNIX, and we already admit, going into the game, that a good body of work that's in Linux is OK--by definition it's OK, by definition part of it was the BSD stuff, Linus's put stuff, other people--OK, fine, X percent of that is OK. We argue that X percent of it is not OK. That really is the basis of our claims. Red Sox guy.

Question: How would you respond to... It seems to me...I don't have much of a computer background, but from what I've gathered here, in trying to put together the notions of copyright in the computer context, it seems to me that you're kind of hiding the ball in the sense that if you put that excerpt from the Constitution back up on the screen, I don't see how you're living up to any part of that notion of copyright as getting the expression out for the public to ponder in awe at, even if you're worried you're a monopoly. You're sort of not even providing the expression for public viewing, and yet you're still acquiring and maintaining all this monopoly power. How do you justify that from a copyright perspective?

I'm not trying to argue is there infringement or not, but how do you even sort of, outside of your individual rights and your capitalistic notions, how do you even tie it back to progression of science?

McBride: Well, I think we're arguing the other side of it. I think what you're saying is there's an argument that says the progress of science should make all of this stuff available for free. We're arguing the flip side of that, which says the best way to progress science is to make this stuff more protectable, that you can profit from it over the years, and that's in fact what the Supreme Court majority decision came down on.

Question: I just think when we were talking about interface before, it just sort of seemed to me that this is more of like what you guys are trying to provide here is a functionality, is a certain function. And it seems to me like that is more of a patent notion, and you should have some disclosure there. Yet here you have this code that you're trying to make millions of dollars--rightfully so, you've spent them, millions of dollars--and yet, you're not even providing the expression, which is sort of the basis of copyright.

Sontag: Yeah, let me take a run at this. Because we're dealing with, you have a number of different types of intellectual property law. You have patents that you were talking about for a moment, where you publish the invention. You have copyrights, for which you may or may not publicly publish the actual expression. I'd say, in a lot of ways, that UNIX is widely published in terms of the binary run-time implementations, the actual program running out there that people are able to see, use, and benefit from. What we're protecting in that case is our copyrighted work, the actual programming code that makes that UNIX system and licensed to many users out there that have developed their own versions of UNIX and created derivative works. By contract, they had the right to do so, so long as they kept that derivative work, that product based on UNIX System V, as part of that work that they built, and kept the code confidential and didn't freely give it away. So that's our issue with IBM: they took a body of work that they licensed from us, they built upon it, they created a derivative work called AIX, they took portions of that, ultimately, and contributed it into Linux. That's one whole body of work for which we have concerns, that ultimately can become a copyright issue. All right? We have a whole other body of copyright issues independent of IBM that we also have issue with.

[85:00]

So, you can't, let's not just muddle it all as...I think a lot of times people confuse intellectual property and think it's only patents. There's many different types of intellectual property. I would even put in contract law as a basis of, in some cases, intellectual property or defining of intellectual property. Deciding what you can do with your derivative works for licensing something or not. So all of those elements have to be combined together to be able to decide what is allowed, what is licensed out, what is freely available and in the case of SCO we have a couple separate issues that are going on here and it's not ... the easiest thing for people to just in five minutes looking on one particular website to get the full understanding of the issue at hand but simply we are, you know, trying to enforce our rights that we paid, as you mentioned, a lot of money for. And that's just part of the process. We are trying to use the legal system to be able to go through the process and prove that we have ownership of things. But we are not going to publicly expose all of that because a lot of that evidence and so on, is confidential information that we have licensed out widely and if we publicly make it available, it breaks those confidentiality provisions with all those licensees. It would be very damaging to our company.

So we are trying to give out and expose as much as we can. We are also trying not to just try this whole case out on the internet. We are trying to make sure that the appropriate information is made available to the court system first, such as the evidence, we supplied in terms of our case with IBM. It's been made available to IBM, made available to the court and if appropriate and the judge so chooses it may be available more widely or in a public arena. So there's a lot of steps that we have to go through. Our hands are tied on some things in terms of what we can show and what we can't. But we are trying to make as much information available as possible while also respecting the legal system.

McBride: Let's take a few more questions then we'll ....

[inaudible]

Zarren: Sorry can I just ask you to use it? There's people watching online and they can't hear unless you use it.

Question: Well, let me tell them who I am. I'm Kathy [inaudible] , a law student at BU. And my question has to do with derivative works, that when you put up your slide, you mentioned that there was kernel 2.2 and you described that as the hobbyist. So I'm taking from your inference that you don't have any issue with any of the intellectual property in kernel 2.2. So my question would be: What would happen if all of your allegations are true, and you win on all of your claims, and you have the copyrights acknowledged as being yours etc., etc. What happens to all the people upstream who did Linux up until that point where your intellectual property may have gotten in, if you manage to make it that you end up getting revenue from Linux? What happens to all those prior people and isn't your work a derivative of theirs? Where you are benefiting from the work that happened upstream? What happens, how do they get compensated, for instance?

McBride: So, very very interesting question, intriguing question. So we're ... we've basically...we didn't start off with a license. We didn't even roll the licensing program out until somebody came in and said, How can I get access to your IP? So the only thing we said with our licensing program ... We've never said, Here is a license for Linux. We've never said, This is, if you take this, boy, you've got a license for Linux. All we've said is, if anybody wants to use our intellectual property and use it across any operating system, Linux, whatever it may be, here's how you do that.

So, we're not speaking for Linux as a whole. If, if we get into a mode where you say O.K. SCO wins all these things and, boy, you've got to get your check out and start writing. All we're commenting on is the intellectual property rights that we feel are in there, as it relates to us. Who hasn't, we'll go back there.

Question: Looking beyond your case. Do you feel there is a point at which intellectual property protection, a point at which the pendulum swings too far? The main point to me in Eldred was about the length of a copyright term. So, in that or in, just in general, the strength or amount to which the copyright law favors the producers of work instead of the consumers of intellectual property. Is there a point at which that balance shifts so far that science and the useful arts are no longer promoted? And, if so, what do you think that point is?

[90:00]

McBride: On the way out here, I was reading the ABA Journal, of all things. It's like, how did I end up in this spot, you know? The American Bar Association Journal and its talking about Lessig's crushing defeat on Eldred/Ashcroft, and his point, that he's gonna, you know, if you read his stuff, he says, The only reason we lost that is -- 'cause I just didn't argue it very well, so we're gonna, you know, charge the hill again and next time we'll get it right.

We recognize that there are two arguments here, you know. Maybe it's a self-serving interest for us because we have these copyrights, to be in the position we're in, but clearly there were also seven Supreme Court justices that are saying that it should lean this way. On the next run up the hill, does it, does it start swinging back? I don't know, I'm just telling you, you know, this is where the status of it seems to be right now.

Question: But in your opinion at what point does intellectual property protection no longer promote science?

Sontag: It, it's a, there's a balance there, and that, you know, society and individual, you know, rights are what have to be balanced, and that's what occurs in the court system every day. But, you know, just think of it, you know, law isn't just, you know, about balancing, you know, words that are in a contract but ultimately having to balance the issues of, you know, human behavior. And, when we're talking about, you know, rights of individuals versus rights of society do we ultimately get to a point where if it's all free, it's all shared, there is no, you know, individual contribution that is recognized, how are people going to function? Are we ultimately going to see a lot of progress in the useful work in science, or are we going to see people sitting back and going, I get nothing for this, so why am I going to contribute? It's just like, if there was no grades with going to college, would you work so hard? If there was no benefit for amassing knowledge for a career beyond that, would you work so hard in school? You know, if there was no individual benefit ultimately, are you going to work so hard to pursue something? And that's what ultimately has to be balanced.

Zarren: I can take one more question.

McBride: All the way back.

Question: Thanks. Earlier you mentioned the files that you released to the, as examples of where Linux infringed on your intellectual property, and you also mentioned that Linus himself pointed out that some of those he had written himself way, way, way back when. That kind of undermined your argument, and you lost some credibility there, and I believe an article came out last week that threw into question where some of the other ABI source came from, and if in fact it may have been even released to the world by Caldera themselves. What are your comments on that? And are you going to show better diligence in the future when you do release source code as an example of infringement?

McBride: Well, let's just stick right on those files right now. Again, Linus said two of those files I remember writing back in the early nineties. I ...

Sontag: I still have issues with those two files, by the way ...

McBride: Right, we don't, we'll get to that as we go through the court system here. But what about the other seventy? I mean, again, we have brought in some experts that understand Unix and Linux, and this is not Chris and I up here making this stuff up. There are very strong experts that are going to be weighing in on the witness stand that have gone through all of our property rights, and they've gone through everything on Unix and everything on Linux. Take the AT&T/US . . . or the AT&T/BSD settlement agreement that governs the use of these files that we're talking about. Has anybody in here, in this room seen that agreement? It's under seal, OK? So the starting point here is, as Chris said earlier, its real easy to throw some stuff out there and say, Well, this argument is gone because of that. It's real easy to go onto a website and put up a bunch of stuff as arguments. We'll be more than glad to get all of the issues on the table and basically sort everything out and that's what we expect to do through the judicial system. Last question?

Question: [inaudible]

Zarren: The question, just for those of you watching online, is, What's the timetable for resolving the court issues, and also what are the implications of winning and losing? Is that, what are the implications of winning and losing? That's probably a good last question.

McBride: Yeah, OK. She really wants to ask one, let's do hers first and then we'll have that as the last one. Go ahead.

[95:00]

Question: Hi, I'm Erica [inaudible], I'm also from MIT. I've been listening to you all evening repeat that you have no problem with developers who choose to distribute their copyrighted works under the GPL. But I have a quote here from you on December 4th where you said, "SCO asserts that the GPL under which Linux is distributed violates the US Constitution and US copyright and patent laws." I'm curious why you would say that?

McBride: So, if you take a look at, go back to the notion again, we basically would say, from a voluntary standpoint, to the extent that people put this in there, then great. God bless you. When this thing moves into, what this whole thing is ... The crux is, with Linux, it's the operating environment. And when the operating environment becomes standardized, and there aren't choices out there for people that have to play. An operating system is a unique beast, because you're not just talking about an application. You're not talking about a widget or a piece of hardware . You're talking about something that a lot of people have to play into.

When you come back and basically say at the underlying level here, from a voluntary perspective, if people are putting things in there, fine. If people are putting things in there that are in violation of our rights, if they are putting our stuff in there, then we do have a big problem with that.

The last question up here then: The time frame on all of this. We filed the initial suit against IBM March of last year. We've been going through the discovery phase. There have been motions back and forth. So we are in the discovery phase right now, and it's set to go to a Utah Federal Court jury trial on April 11 of 2005. So we're a little over year away from having that heard in a Utah court room.

The Novell issue. We filed for, basically we think that is going to happen more quickly. It's a very simple issue. Preliminary and permanent injunctive relief we've filed for there. We expect that one to probably come in ahead of the IBM decision.

And then as far as these end user cases that we're talking about. We don't know yet. You should expect to see... Boies basically said that we'd have these filed by February 18th. And from what I can see right now, that's probably, I expect that is what's going to happen.

So, in the end, what happens to the SCO company? So if we start out talking about this big giant David-Goliath battle, it's turned into a much bigger, more intense issue with thousands of people around the world. Many here in this room that are not particularly pleased with our company. We are working through these issues. We feel like we have very strong property rights. We feel as strongly that our property rights are being stepped on and violated as many people here feel these SCO guys are coming after our free work. I would like to dispel one thing right now. We are not, I repeat not, trying to go after the legitimate contributions that Linus, maybe some of you in this room, or people around the world or even legitimate contributions that IBM has made.

We are going to fight extremely hard until we get what we think is the justice due us. Due to things that we think are being violated against our rights.

In the Super Bowl parlance, you win the Super Bowl, you lose, it's a big difference. I read a study a while ago, communities where the team wins the Super Bowl, the following year the morale of the whole city is higher and violent crime is lower. Particularly domestic violence crime goes down.

Sontag: So let's look forward to a good year.

McBride: Look forward to a good year here in the Boston area. It's pretty interesting that that one thing can have such a big impact on a community. I would expect a similar things here. I think the winner of this case, one way or another, it's going to be a big win. We look forward to having our case tried through the court system. Obviously for us to win this, it would be a huge deal. So that's what we're fighting for. We're going to, again, go through the court system. We look forward to the results. We feel confident in our claims.

But just like the Super Bowl, you gotta go to the game and play to know what's actually going to happen.

Zarren: At this point I just want to [mention] a couple of things. First of all, I would like to thank Darin Sands here, who organizes all of our speaker series. He put this whole thing together. And then also thank these guys for coming and responding to all the questions. If people want to hang around and chat about the journal or any of these issues, obviously, we'll stay around. There may still be some food outside. But I would just like to thank Darin and the SCO people for coming. And please ...

Question: What's the other event?

Zarren: The other event is, I believe it's two, three weeks. Monday, February 23rd. We'll put some details of that on our website. We're not sure exactly when or where. But Monday the 23rd of February, Chris Stone the vice chair of Novell will be here, talking about many of the same issues. So I'd like to give a round of applause to our speakers.

[APPLAUSE].

01:40 AM EST

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